40 years of managing the nation’s oil and gas resources

Today the Norwegian Petroleum Directorate celebrates its 40th anniversary.

We are a 40-year old that enjoys job satisfaction, and we believe we do an important job.

An independent and professionally strong NPD has been crucial for the first 40 years and will continue to be so in the next 40. The oil and gas represent a substantial part of the national economy, and the NPD plays an important part in recovering the oil and gas efficiently and at the right time. 

In 1972, not many people saw the outlines of the Norwegian oil adventure and only a few could envisage how the situation would be today. Even in the NPD there were many people who believed it would be over in the course of the 1990s.

When I became the Director General five years ago, I occasionally had the feeling I would be the last one. I would be turning out the lights. With the recent major discoveries in the North Sea and the Barents Sea, however, this feeling has changed. Now we feel an enormous optimism.

The latest white paper on petroleum activities emphasises the industry’s long-term perspective. The main points are clear; a stronger commitment shall be made to fields in operation, the discoveries must be brought on stream, further exploration must be conducted in areas that have already been amply explored, and the opening of new areas must be facilitated.

The authorities have facilitated further exploration in matures areas. Combined with high oil prices this has more than doubled the number of exploration wells in the last ten years, and many discoveries have been made. In addition, the Storting (Norwegian Parliament) started an opening process in the sea areas off the coast of Jan Mayen and in ”the new Norway” in the Barents Sea; the formerly disputed area towards the Russian border.

When we celebrated our 30th anniversary, we strongly criticized the oil companies for being too short-sighted: «The players on the shelf work hard to improve earnings and increase production. But the focus today, as perceived by the NPD, is directed towards short-sighted projects and rapid earnings». This is what we wrote in our first annual report after reaching the age of thirty.

This still concerns us and we see that our concern makes a difference. The companies are working to increase long-term earnings through increased production. But we are not satisfied. Even though the large fields have produced for a long time, there are still considerable assets to be retrieved there. More than half of the original oil will remain when they shut down – according to current plans. This means that there are ample opportunities for enhancing recovery. But this requires the will and ability to implement the necessary investments. One of our most important tasks is to follow up the industry so as to contribute to ensuring that profitable resources in producing fields are not lost.  

Reaching the annual production targets is challenging for several of the fields. Drilling wells is the most important method for maintaining and increasing production, but the companies drill fewer wells than planned. The cost level on the Norwegian shelf is one reason why it is challenging to get the job done.  Good cost control, new drilling methods and new drilling technology can make it possible to produce more. The NPD follows up developments, and I am a member of the government-appointed committee that looks at rig costs on the Norwegian shelf.

Costs are also important when new discoveries are to be developed. Minor discoveries often require access to process and transport facilities if the development is to be profitable. In mature areas such discoveries are generally developed by being tied in to independent fields. This also contributes to extending the lifetime of existing fields. Major discoveries that are developed can also be dependent on available capacity in infrastructure. Unitised development of several discoveries across production licences can reduce unit costs and make profitable discoveries even more profitable, or lead to development of discoveries that would have been only marginally profitable by themselves.

Unitised development of several discoveries is not necessarily something the oil companies want, and it can lead to a conflict of interests. In connection with new field developments it is the NPD’s job to solicit solutions that can provide unitisation gains.

It has been said that ”Life begins at forty”, as consolation or because a 40-year-old has enough experience and knowledge to enjoy life.

For the NPD it is natural to use our experience and do a good job in the next 40 years as well.

The production  rate on the Norwegian shelf is still high. In 2010, Norway was the seventh largest exporter of oil and the second largest exporter of natural gas world-wide. However, oil production has declined since the production peak in 2001 and is expected to drop further. Gas production is increasing, but overall production on the shelf has declined since 2004.

Limiting the decline in production is a political goal. If the goal is to be reached, then in addition to enhancing recovery in fields in operation, more exploration must be conducted in open areas concurrent with petroleum activities being allowed in areas that have not yet been opened.

Nearly 40 per cent of  petroleum production on the Norwegian shelf in 2030 will come from discoveries not yet made. The number and size of the discoveries will determine the level of future production. Even though significant discoveries have been made recently in both mature and immature acreage, the potential for making major discoveries is probably greater in parts of the unopened areas than in those already opened.

The greatest expectations concern the Barents Sea. For a geologist who has worked with the Barents Sea for a long time, it is pleasing to see the substantial interest the latest oil discoveries have brought about. The area might be playing an important part in maintaining production in the long run while at the same time securing Norway’s status as a significant and reliable oil and gas exporter.

How high will the production level on the Norwegian shelf be in 40 years? There will most likely be production from the North Sea, the Norwegian Sea and the Barent Sea in 2050. Probably also in the new area to the east of the Barents Sea. We will most likely have started exploration activities in the north Barents Sea. Perhaps there are other forms of oil and gas on the Norwegian shelf that are of commercial interest, such as gas hydrates and oil shale? I know one thing, and that is that I will work to ensure that an independent and professionally strong NPD will be important in the future, so that the NPD’s experience and expertise can be applied to the recovery of these oil and gas resources in the best interests of our society! 

 

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